Rangelands are important for mitigating climate change and rehabilitating land by storing carbon from woody plants and seeds in the soil. However, there is a lack of empirical data on how traditional rangeland management practices (such as enclosure, communal grazing and prescribed fire) affect the carbon storage of woody species and the conservation potential of soil seed banks. This study evaluates the carbon sequestration and soil seed bank conservation potential of traditional rangeland management practices in the Western Guji zone, Ethiopia. A total of 32 sample plots were established using systematic random sampling, with 12 in each management practice, to measure woody biomass and estimate carbon stock using a nondestructive method. Additionally, 72 soil samples were collected for soil seed bank analysis, with 24 samples taken from each type of rangeland management practice. The study found that enclosures had the highest amount of carbon stocks 63.1 tons per hectare (t ha−1), with a corresponding carbon dioxide equivalent (CO2e) sequestration of 231.58 t ha-1, followed by communal grazing areas that stored 27.05 t ha−1 of carbon with a CO2e sequestration of 99.27 t ha−1. Prescribed fire had the lowest carbon stocks at 19.39 t ha−1, with a CO2e sequestration of 71.16 t ha−1. The study also found that different traditional rangeland management practices significantly influenced the diversity, richness, and density of woody species in soil seed banks. The highest Shannon diversity was recorded in enclosures (3.56 ± 0.09), followed by communal grazing (2.87 ± 0.14) and prescribed fire (1.27 ± 0.08). As a result, enclosure promotes the storage of carbon in woody plants and increases the diversity, density, and richness of woody species seeds in the soil, while prescribed fire reduces it. Therefore, it recommend for pastoralists to expand the use of enclosures as it improves the potential for conserving carbon stocks and soil seed banks of woody species.